Jazz Pharmaceuticals (JAZZ) agreed to buy GW Pharmaceuticals (GWPH) for $7.2 billion on Wednesday — sending GWPH stock to a record high.
The deal is expected to close in the second quarter. The acquisition joins neuroscience-focused Jazz and the first company to gain Food and Drug Administration approval for a drug derived from the cannabis plant. GW Pharma’s drug, Epidiolex, treats seizure conditions.
Wall Street didn’t see the deal coming. Jazz focuses on sleeping disorders. But the deal places a wealthy premium on GWPH stock and diminishes the likelihood of other bidders, Needham analyst Serge Belanger said in a report to clients.
“The acquisition allows Jazz to become a significant epilepsy player by adding Epidiolex, which exited 2020 with sales annualizing at about $576 million despite a challenging Covid environment and ahead of significant growth driven by a tuberous sclerosis label expansion and broad European launch,” he said.
On today’s stock market, Jazz stock toppled 3.9% to 151.21. GWPH stock soared 44.5% to 211.37.
GWPH Stock Flies On Takeover Deal
Under the terms of the deal, Jazz will pay $220 per American depositary share. That’s split in $200 per ADS in cash and $20 in Jazz ordinary shares. The entire deal values GWPH stock at $7.2 billion, or $6.7 billion net of GW Pharma’s cash.
In addition to Epidiolex, Jazz will add a growing pipeline of cannabis-based drugs. Investors in GWPH stock are watching nabiximols, a potential treatment for spasticity-related conditions. The company expects to have study results beginning in mid-2021.
Further, GW Pharma is working to expand into Europe where its blockbuster potential seizure drug — dubbed Epidyolex overseas — just gained approval.
Needham’s Belanger downgraded GWPH to a hold rating on the deal.
The deal also sent shares of fellow epilepsy-focused biotech companies flying. Zogenix (ZGNX) stock roared up 9.5% to 21.55. Xenon Pharmaceuticals (XENE) popped 5.4% to 17.16. Zynerba Pharmaceuticals (ZYNE) surged 27.4% to 4.53.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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